Stocks start in the green ahead of trade deal signing

Andrew Cummings
January 16, 2020

President Donald Trump and China's chief negotiator, Liu He, signed the "Phase 1" deal on Wednesday before a group of corporate executives and reporters at the White House. The pact eases some sanctions against China. Beijing agreed to step up orders of soybeans, pork and other US farm products by $32 billion, of manufactured goods by around $80 billion, of energy products by some $50 billion and of services by about $35 billion.

"This was telegraphed well enough that the market is kind of looking through it and toward the next phase and what that means", said Keith Buchanan, portfolio manager at Globalt Investments.

An early look at the S&P sectors shows defensive oriented real estate (+0.6%), health care (+0.6%) and utilities (+0.6%) outperforming the broader market, while financials (-0.7%) and energy (-0.5%) are off to a weak start. Suppliers and manufacturers of household goods also grew.

Apple AAPL.O , Facebook Inc FB.O , Netflix Inc NFLX.O , Microsoft Corp MSFT.O and Inc AMZN.O , which have powered the longest bull run in USA equities, were among the top contributors to record high closes for the S&P 500 and Nasdaq. The index also climbed to an all-time high on Monday. Eastern time. The Dow rose 89 points, or 0.3%, to 29,029, a record high. The Nasdaq rose 7 points, or 0.1%, to 9,258. Of those companies, 82% have posted better-than-expected profits. The Russell 2000 gained 6.66 points or 0.4% to 1,682.40.

The S&P 500 is up 23.94 points, or 0.7%.

The yield on the 10-year Treasury note fell to 1.78% from 1.81% late Tuesday.

Asia saw a mixed session as investors took in the long-awaited deal between the world's two largest economies. The punitive tariffs for Chinese goods are still around $ 360 billion.

The milestones came on a day when the market was tight as investors weighed in the latest corporate earnings reports and the widely anticipated signing of a first US-China trade agreement. Earnings have remained low for the past three quarters, and if the fourth quarter meets expectations, it should be roughly the same.

Strong earnings growth this year will help determine whether the stock market continues to rally. Experts estimated S&P 500 earnings to have fallen 2% in the fourth quarter on a year-over-year basis. The share rose 2.8%. It also binds Beijing to avoid currency manipulation to gain an advantage and includes an enforcement system to ensure promises are kept.

Technology companies also rose. The industry relies on China for sales and supply chains and benefits from better trade relationships.

Hang Seng futures earlier gained 0.2%.

West Texas Intermediate crude declined 0.4 per cent to US$58 a barrel, the lowest in six weeks. Valero Energy dropped 3.3%.

US stocks rose to all-time highs amid optimism the initial phase of a trade accord with China will propel growth. Hovnanian Enterprises climbed 4.5%.

And Target (TGT) lost 6.6% after reporting disappointing holiday same-store sales. The company said weak sales of electronics, toys and home goods crimped its sales growth to just 1.4% in November and December.

Benchmark crude oil fell 42 cents to settle at $57.81 a barrel.

Wholesale gasoline fell 1 cent to $1.64 per gallon.

Gold rose $ 9.70 to $ 1,552.10 an ounce, silver rose 25 cents to $ 17.92 an ounce, and copper fell 1 cent to $ 2.87 a pound.

The yen was at 109.90 per dollar, little changed. The euro rose to $1.1145 from $1.1128.

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